[ArbitraryLimits]

Everything you've said is strictly true, but I feel like it misses the point. The difference between water and diamonds is that water's marginal utility is almost zero, owing to its ubiquity, whereas the marginal "utility" of a diamond is huge since most people have none already.

[ergoproxy]

Adam Smith's LTV also solves the Paradox of Value just as well as Marginalism: "The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it" (Book I, Chapter V, "Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money"). So diamonds cost more simply because they require more toil to acquire than water.

Marginalism (in its incarnations as Austrian economics and Neoclassical economics) has got its own problems: (1) impossible to measure an individual consumers' marginal utility; (2) general equilibria only exist under conditions of perfect competition; (3) uniqueness of a general equilibrium not guaranteed; and (4) general equilibria aren't stable (see the Sonnenschein–Mantel–Debreu theorem).

Marginalism in all its forms seems to exist only to attack government regulation, justify income inequality, and otherwise promote the interests of the top 1%. And it's proponents tell us that the only alternatives are systems designed to rob us and take away our individual freedom (Keynesianism and Marxism).

So my point was to provoke a reconsideration of Classical economics, which offers a forgotten alternative: Classical economists like Smith saw wealth as a flow of goods rather than as a stock of money; emphasized the creation of wealth; and (most importantly) viewed "laissez-faire" as a means to the end of greater competition, rather than as an end in itself.

Returning to the topic in the OP, in Classical economics, it's possible that the "natural prices" of books are higher than the "market prices," because the market is not competitive, and middlemen like Bezos are using their market power to suppress the wages of authors.